Proposed medical park’s developer short on cash

BEN LUNDIN Staff Writer

Thursday

Sep 27, 2007 at 11:52 AMSep 27, 2007 at 12:02 PM

NAPOLEONVILLE -- Red Reef Laboratories, from its 3,000-square-foot office building in southeastern Florida, announced plans last month to develop a $1 billion cystic-fibrosis research center in Napoleonville despite one problem: It doesn’t have enough money.

Though Red Reef’s founder and spokesman says he is confident the Deerfield Beach, Fla.-based company will find the money, he has yet to pinpoint where. As a result, speculation among locals about what Red Reef will eventually build in Napoleonville has become a topic of curiosity and apprehension.

The company’s changing plans and vague public statements about the Napoleonville project have intensified that concern.

Red Reef’s Web site claims the company is a "scientific research, development and marketing group established to assemble, develop, commercialize and bring to market a variety of chemical and biological products, utilizing advanced surfactant technology and increasingly ëgreen’ compounds."

Its Web site neither mentions medical research nor cystic-fibrosis research, the company’s claimed intent for the Napoleonville plot.

Red Reef lists four employees in its May 23 filing to the federal Securities and Exchange Commission, each with a salary of $16,250 per year. They include Vice President Peter Versace, Director John Spargo, Chief Operating Officer Nathan Evans and Chairman Claus Wagner-Bartak, the latter of whom has a documented track record of success in the business world.

The company recently hired former Assumption Parish state Rep. Harry "Soup" Kember, who sold the Napoleonville property for $2,000 in Red Reef stock and transferred a $421,625 debt to Red Reef in the sale, according to records filed in the Assumption Parish Clerk of Court’s Office.

"He’s got a lot of debt," said Warren Gonzales, a resident southwest of the property. "That’s one reason everybody was concerned when he said they were going to do this big, substantial development."

Guido Volante, who formed the company Oct. 1, 2002, stood as a founder and its senior vice president until the company opened its stock to public trading Oct. 18, 2006, when he became an outside investor and chief consultant for the company. A 1997 court decision bars him from officially representing public companies like Red Reef.

In his current role with Red Reef, he recommends business endeavors that are generally accepted, he said, and speaks on behalf of the company as its representative.

In a lawsuit filed Sept. 16, 1997, in the U.S. District Court in Miami, Fla., involving alleged stock-trading and bookkeeping violations by Volante, he signed court papers allowing him to neither admit nor deny guilt. As a result, the court barred Volante from ever acting as a director or officer of a company that issues stock, as Red Reef does.

The SEC alleged in the complaint, involving one of Volante’s former companies, Century Technologies, that Volante conducted "fraudulent representations related to Century’s purported ownership of certain feature films … as assets on its balance sheet which resulted in the overstatement of the value of the company’s total assets by as much as 90 percent." Red Reef "failed to maintain books and records which accurately reflected its financial condition and made misrepresentations to its auditors," the complaint says.

The suit also claims Volante "filed false and misleading periodic reports, press releases and other public communications."

'NEVER CONVICTED’

"I was never convicted of anything," Volante said when questioned about the lawsuits. "I simply signed the consent agreement because I ran out of funds. I felt in my heart that I owed it to myself to fight them."

Century Technologies owed its shareholders $345,000, according to its most-recent financial statement to the SEC, filed Sept. 30, 1996, when Volante claims he sold the business to a film company for about $300,000. It folded six months later.

A background check of Volante through Accurint, a LexisNexis database of records on individuals and businesses, reveals two bankruptcies stemming from Volante’s past business ventures and two tax liens -- outstanding tax money owed to the government -- that he downplays as errors on the part of others.

"Those tax liens were there basically because I disputed a tax bill. They’ve been resolved; everything is paid and adjudicated, but they still show up for some reason," Volante said. "The two bankruptcies I filed, but I withdrew them."

Though Volante formed Red Reef less than five years ago, he said it has created products such as a technology that can kill anthrax spores with better results of any other similar chemical in existence and a biochemical that can fight Asian bird flu. All of this, he said, was created by a chemist operating out of no more than 3,000 square feet of office space in Deerfield Beach, Fla.

"You don’t need a lot of room to make chemistry," Volante said. "We like results. We’re not in show business."

RED REEF’S ROOTS

Red Reef began in 2002 as GSC Global and underwent a name change Jan. 10, 2005, according to the Florida Secretary of State’s Office. The change followed a civil lawsuit filed June 17, 2004, in San Diego Superior Court against Red Reef that the company settled out of court for $35,000.

The plaintiff, Global Bio Solutions, alleged that Red Reef "induced breach of contract against Global Bio Solutions, … interfered with a prospective economic advantage … (and) conducted unfair business practices against the company," according to a San Diego Supreme Court Operations Clerk.

Red Reef claims to manufacture five industrial-strength cleaning products for mold and bacteria removal, but only one of those is available for sale, a sodium hydrochloride-based mold remover called BioClear TKO.

The Seminole Hard Rock Hotel in Hollywood, Fla., is the company’s only current purchaser that product, Volante said. Julianne Carelli, public-relations and advertising manager at the hotel, confirmed that the Hard Rock uses the product regularly to clean public outdoor areas.

Red Reef ushers in most of its income from cleaning services in Florida homes, Volante said, and not the sale of its products. He asked that one homeowner who uses the companyës cleaning services be left off the record and declined to specify the others, saying he wanted to protect the interest of his clients.

The company also sells soap to Ditech, a paint-restoration company with five service centers in Florida, he said.

In Red Reef’s most-recent financial statement to the SEC, from Sept. 30, 2006, to March 31, the company earned $444,197 in services and $5,000 in products and reported a net loss of $117,380.

WHERE’S THE MONEY?

Volante personally vouches for the company’s financial health, but records on file with the Securities and Exchange Commission paint a different picture.

The company’s net loss over the past two years was more than $2.5 million. Over those same years, the company earned less than $100,000, SEC records show.

In 2005 and 2006, Red Reef’s total assets were slightly more than $700,000. Nearly $650,000 of that came from loans and advances to stockholders, according to its May 23 balance sheet and statement of operations filed to the SEC.

Its total debt jumped from $438,044 in 2005 to $1.8 million in 2006. Part of the rise came from $1.2 million in "accrued consulting services to be paid in stock," SEC records show.

Volante, himself a consultant for Red Reef, could not explain who received that money.

"We’ve paid consultants with stock from time to time but nothing like $1.2 million. The only thing I can think is our law firm in Baton Rouge and Jackson, but their fees are nowhere near that either," he said.

Red Reef opened at 45 cents per share on the Over the Counter Exchange of India under the ticket symbol RRLB.PK on Oct. 18, 2006. It rose five days later to a $2.25 peak and plummeted to 1 cent by Feb. 14, 2007, where it has remained for months.

The company has nearly 906 million shares publicly available, a potential total of $9.06 million if it sold all its shares at the current value -- but Volante acknowledged Red Reef is not worth that amount.

"We don’t spend a lot of time worrying about the price of the stock. It’s not a good idea," he said. "For new companies, that’s not really an issue. It’s not really a measure of the company’s future."

Volante denied that Red Reef’s lack of money would affect its plan for the Napoleonville property.

"Nobody comes into these projects and puts that kind of money on the table," he said. "We’re telling everybody we don’t have the money. This is us. But why would we do that if we didn’t think we had a strategy for success? We wanted people to know we do everything palm up. We believe in full disclosure."

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